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How does California attract small businesses in spite of taxes?

California is well-known for having the highest individual tax rate in the country. In spite of this, some of the biggest and most profitable companies, such as Google and Facebook, call California home. In fact, CNBC estimates that California enjoyed the highest levels of growth in the private sector in March 2015, a trend that is not uncommon in California. Much of this came from small businesses.

So, how does California create growth in spite of high taxes, which you may assume chases businesses away? One good answer is tourism. Tourism is a great way to stimulate the local economy in any region. California features many hot spots for visitors, including national parks, famous cities, wine country and warm beaches. Tourists provide local businesses with additional customer base for cab drivers, bed and breakfasts, wineries and restaurants.

Another factor on California's side is entrepreneur-friendly universities. Stanford University, for example, feeds Silicon Valley with a labor pool of bright and talented graduates. Stanford is well-known as a leading research university for tech. So, it is only natural that some of the biggest household names in tech would grow up around it.

Finally, states attract entrepreneurs by providing a ripe environment for obtaining funding. Not surprisingly, California was responsible for 43% of venture capital deals in the first quarter of 2015. Even Massachusetts only accounted for 12%, and New York, just 11%. Needless to say, the Golden State may be one of the best locations to launch your small business.

This article provides information on California's track record in attracting small businesses. It should not be used as investment or legal advice.

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